Euro Will End in 5 Years

European Commission President Barroso started to criticize the austerity measures that the EU has imposed on the mainly Southern European members states in economic crisis. He stated that while the policy may be „fundamentally right,“ it had „reached its limits.“ In the short-term, „a stronger emphasis on growth“ is needed. Look at the beauty of political sentences – the policy is fundamentally right but not now; somewhere in the brighter future.

Spanish Prime Minister Mariano Rajoy probably anticipated Mr. Barroso´s opinions because he has already called for a two-year extension to meet European Union deficit rules. Reasons behind are lower growth forecast and a record 27 percent unemployment rate. Spain budget deficit hit a record level of 10.6 percent of gross domestic product but the government still promise that it will be within the EU limit of 3 percent by 2016. Yes, we “believe”. Spanish 10 Y bonds are record low on yearly basis and hit 4.3 % at the end of the week. So investors and borrowers really believe. Comments are not needed. And austerity measures are not popular among public as well. Spain and Portugal had massive anti-austerity protests last week. Yes, once again. This is another reason why there are only two possible outcomes from this state. One is inflation and more public spending and second is that people realize that their dreaming should be over. And the first is more probable.

How long will Euro last? Up to 5 years; it is not mine opinion but senior German government advisor´s. He stated last week that Euro has a limited chance of survival and 5 years sound realistic. The German government’s official line is opposite; at least for now.

Greece will receive another € 8.8 billion installment of the bailout package from the Troika. The condition of the installment is that Greece will privatize as much state owned assets as possible. They are prepared to sell more than 70,000 lots, ranging from pristine stretches of coast through to royal palaces, marinas, thermal baths, ski resorts and entire islands. To sell some attractive property would not be so difficult but it will be more difficult to find some investors for loss-making behemoths like the Hellenic Railways Network and the Public Power Corporation. Why? Both of them have militant unions.

The debt of the US has reached almost 105 % of its GDP to rise from 103 % in December 2012; it means $ 16,774 billion in nominal terms. The GDP numbers from the US economy disappointed markets once the expectations were at 3 % and real output was only 2.5 % in first quarter of 2013.

Some people (especially investors) still hope that the FED has some kind of exit strategy how to decrease its more than $3 trillion bond portfolio which was created just within a few years by buying American bonds to hold rates of debt on sustainable levels. But the strategy is so secret that it seems to some skeptics that it does not exist. This skepticism is supported by the latest news. Two House Republicans are frustrated at the lack of response to a February request demanding more details on the central bank’s strategy to unwind assets purchased during years of its easy-money stimulus programs. “The American people have a right to know the true risks associated with the expansion of the Federal Reserve’s balance sheet,” the lawmakers wrote in a letter dated April 22. Response from FED? Mysterious silence or political answers. And how a typical political answer looks like? We are able to give you a lecture how to answer a simple question; for example: “How much is inflation in Argentina?” To understand Spanish is helpful but not required: